Backtesting in the algo-trading workflow
Backtesting is the stage where an algorithmic strategy is validated before it risks capital. AlgoTradeGyan covers how to build and run systems; the full, dedicated treatment of backtesting and strategy validation now lives on our sister site, BacktestGyan.
Where does backtesting fit? In a systematic workflow you form a hypothesis, code the rules, then backtest to estimate behaviour, stress-test robustness, and only then forward-test and deploy with risk controls. Backtesting is necessary but never sufficient — an honest test reduces uncertainty; it never proves future profit.
Learn backtesting in depth on BacktestGyan
The dedicated, standalone reference — every concept with formulas, original diagrams and Indian-market examples.
What is backtesting?
What a backtest can and cannot prove, and why so many fail live.
Performance metrics
CAGR, Sharpe, Sortino, Calmar, drawdown, profit factor and expectancy.
Robustness testing
Walk-forward, Monte Carlo, out-of-sample, forward and stress testing.
Backtesting biases
Look-ahead, survivorship, curve fitting, overfitting and data snooping.
Related on AlgoTradeGyan: risk management, system architecture, execution and the calculators. Or jump straight to BacktestGyan →